Since the 1960s, Arizona, a landlocked state in the south-western US, has been a destination of choice for the country's senior citizens, thanks in no small part to its dry, warm climate. Nationwide, the retirement industry is worth more than $50bn annually, according to market research firm IbisWorld, and it is expected to grow by a further 29% in the next five years. But while this segment of society is undoubtedly lucrative for Arizona, the state's ambitions go much further.

“We are lower cost, we have an excellent regulatory environment, and, especially over the past three years, we have seen significant policy improvements to enhance business opportunities in our state,” says Sandra Watson, the president and CEO of Arizona Commerce Authority (ACA), the state’s economic development organisation.

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A new approach

ACA, an entity that in 2011 replaced the Arizona Department of Commerce, is itself an example of the state’s pro-business attitude. Unlike its predecessor, although it is publicly financed, ACA is controlled by a public-private board of directors. And its strategy, aiming at improving the efficiency of the state’s commercial efforts, seems to be working: in 2013 alone, ACA served more than 2000 clients and closed more than 100 deals.

The Arizona Competitiveness Package, a bill which established ACA, also introduced a number of financial and fiscal incentives in the state, including a $25m 'deal-closing fund', tax credits of up to $3000 for each job created in the state, and up to $1.5m per business in employee training grants.

It is not hard to tell which location ACA is targeting as the source of new investments. In its promotional material, the organisation highlights Arizona's “operating costs of up to 40% lower than in California”, and has two offices in the state. Since 2011, Arizona has attracted 49 new projects from California, worth more than $5.3bn.

Three-pronged approach

However, Ms Watson insists that ACA’s strategy does not simply revolve around highlighting its favourable qualities when compared with California. “We have a three-pronged approach, and apart from recruiting companies to the state, we also focus on business creation and expansion,” she says. “We have dedicated a good portion of our strategy to growing Arizona businesses.” In the fiscal year of 2013, ACA provided financial aid to 168 companies, and its Arizona Innovation Challenge awards $3m annually to blue-chip companies willing to operate or already operating in the state.

As welcome as grants are, if they are not backed up by a skilled workforce then investors may be reluctant to commit to a destination. This is not a problem for Arizona, says Mark McElhinney, president of Lasertel, a manufacturer of high-power semiconductor laser components based in Tucson with 104 employees. “The skills base is actually one of the main reasons why we are here, as the state has a good university system and University of Arizona is very prominent in the field of optics.”

It also turns out that in terms of human resources, close proximity to California also proves to be useful. “We aim at mid-career professionals who after bouncing around California for several years will value the lifestyle that Arizona has to offer,” says Mr McElhinney. He adds that the main components of that lifestyle are an outdoor culture and affordable real estate. Those, plus job opportunities and the sunny weather, were what attracted Mr McElhinney to Arizona. “Granted, this state may not have a lot of trees. But apart from that it has everything,” he says. “I am from Glasgow [in Scotland]. I’ve had my lifetime supply of the rain already.”